"Post-Buffett Era" First Shareholder Letter: Buffett is still at the helm, holding 370 billion in cash, steadfast in Japanese investment strategy

On February 28, 2026, in Omaha, Nebraska, Berkshire Hathaway officially released its 2025 annual shareholder letter. This is the first shareholder letter penned by the new CEO Greg Abel, marking the formal entry of this globally renowned investment empire into the "post-Buffett era."

In the letter, Abel first reassured the market, clearly stating that 95-year-old Warren Buffett remains chairman and "is on the job five days a week." In the face of extreme market concern about Berkshire's future direction, Abel candidly remarked, "Simple arithmetic shows that I cannot serve as CEO for 60 years like Warren; that goal is overly ambitious. But I hope that twenty years from now, you or your descendants will be proud of how much stronger Berkshire has become."

In response to external doubts about "holding a large amount of cash means giving up on investment," Abel directly refuted this. He emphasized that this substantial sum is both a reserve supporting the insurance business and a strategic asset to stand firm during financial storms. "Our goal has always been to hold equity in companies with sustainable profitability, rather than simply holding U.S. Treasury bonds." Based on this logic, Berkshire decisively acquired OxyChem and Bell Labs in 2025.

Regarding the highly anticipated issue of shareholder returns, Abel provided an extremely firm response: "In terms of cash dividends, our principle remains unchanged: as long as every $1 of retained earnings can create more than $1 of market value for shareholders, Berkshire will not pay cash dividends." At the same time, he clearly stated that when the stock price is below the conservatively estimated intrinsic value, stock buybacks remain the preferred option.

Abel demonstrated strong business discipline. He pointed out, "The costs of infrastructure built for ultra-large data centers and cloud computing companies should be borne by the relevant customers and fully reflect the risks of significant fluctuations in long-term demand. Only under the premise of balancing risk and reward will the company proceed with such incremental investments."

Additionally, in response to the frequent wildfire risks in the western United States and the massive claims faced by utility companies, Abel firmly delineated the red line: "Pacific Gas and Electric Company is not the ultimate risk bearer and should not be viewed as an 'ATM.' The company will protect its rights through legal means without bearing responsibility."

From the core financial data perspective, Berkshire achieved an operating profit of $44.5 billion in 2025 (compared to $47.4 billion in 2024), exceeding the average annual level of $37.5 billion over the past five years; net cash flow from operating activities reached $46 billion.

As the "ballast" of Berkshire, the insurance business performed excellently. By the end of 2025, the scale of insurance float soared to $176 billion (up from only $88 billion a decade ago). The combined ratio for property and casualty insurance reached an outstanding 87.1% However, Abel also issued a forward-looking warning to the market. He pointed out that with a large influx of capital into the insurance and reinsurance markets, the pricing of several important insurance products has decreased or the rate of increase has slowed. "We always prioritize underwriting discipline over business scale, so after the attractiveness of pricing declines, premium growth stagnates. We expect that the primary insurance business segment will continue to face market pressure through 2026 and even beyond."

Regarding Burlington Northern Santa Fe Railway Company (BNSF), one of the six major freight rail companies in North America, Abel bluntly stated that its operating profit margin of 345% has improved, but "the gap with industry leaders remains significant." He issued a clear warning: "The company team is well aware of the importance of this opportunity, and if we cannot achieve significant performance improvements in the coming years, we will be deeply disappointed."

In terms of equity investment portfolio, Berkshire has continued its highly concentrated strategy. By the end of 2025, the market value of core holdings in the U.S. (Apple, American Express, Coca-Cola, Moody's) and the five major Japanese trading companies (Mitsubishi, Itochu, Mitsui, Marubeni, Sumitomo) totaled $194 billion, accounting for nearly two-thirds of the $300 billion equity investment portfolio, generating a total of $2.5 billion in dividends that year. Abel stated: "We will continue to adhere to this concentrated investment strategy and will be restrained in adjusting core holdings." At the same time, he candidly admitted that the investment performance in Kraft Heinz has "fallen far short of reasonable levels."

Dear Berkshire shareholders:

Warren Buffett is undoubtedly the greatest investor of all time, benefiting generations with his investment wisdom. He is also an outstanding CEO, having pursued the vision of building a top-tier insurance business since acquiring National Indemnity Company in 1967, using insurance float to successfully invest across major economic sectors in the U.S. (It is somewhat frustrating for Warren that this letter begins by mentioning these well-known facts.)

Warren has often mentioned that his inspiration comes from Ted Williams—this Hall of Fame baseball hitter divided the strike zone into 77 regions and only chose to swing in a very small "comfortable hitting zone," ultimately achieving a career batting average of 0.344 and a historic single-season record of 0.406 in 1941. Warren's investment philosophy similarly embodies this discipline, patience, and judgment: identifying desirable investment opportunities, waiting patiently, and then decisively taking action. But he is much more than a master investor; alongside his business partner Charlie Munger, he has transformed Berkshire into a lasting enterprise. Their world-class capital allocation ability, combined with visionary foresight and leadership, has enabled the company to transition from a founder-led model, laying a solid foundation for development over the next 60 years and beyond.

In addition to these achievements, Berkshire has always regarded its shareholders as true partners over the past sixty years, and this philosophy is the company's most precious asset. Warren often expresses respect and gratitude to Berkshire's long-term shareholders, who constitute one of the finest groups of shareholders among all publicly traded companies. He invests alongside us, candidly documenting the company's successes and failures, and invites us to Omaha each year for open and honest communication meetings His annual letter to shareholders, along with his direct interactions at the Berkshire annual shareholder meeting, vividly illustrates Warren's and Berkshire's commitment to the shareholder partnership.

We are very fortunate that Warren still serves as Chairman of Berkshire, working five days a week. We receive his guidance as we engage in capital allocation activities such as insurance underwriting, operating non-insurance businesses, and making equity investments. Warren remains a shareholder of Berkshire, and the shares he holds will be donated for charitable purposes within about ten years after his passing.

Investing in Berkshire has long been a vote of confidence in the company's founder, and now that trust is placed in Berkshire itself. Your capital and our capital come together, but they do not belong to us; our duty is to fulfill our fiduciary responsibilities. This fiduciary duty shapes the company's culture and reinforces a set of core values—values that are not the product of the company's success but rather the source of that success.

I am deeply honored by the board's appointment of me as CEO of Berkshire and humbled to succeed Warren and write the first annual letter to all of you. Clearly, Warren is a benchmark that is hard to surpass.

To take on any leadership role, one must first understand the organization: its purpose for existence, how its culture shapes the team, and which values guide decision-making. Although my style differs from Warren's and Charlie's, we all agree that Berkshire's emphasis on shareholder interests far exceeds that of peer companies.

My understanding of Berkshire began in 1992. At that time, I moved to Omaha and joined CalEnergy, which had no affiliation with Berkshire. CalEnergy was partially owned by Peter Kiewit Sons', with Walter Scott II serving as chairman, who was also a director at Berkshire. Walter succeeded Peter Kiewit as CEO of the company, setting a crucial benchmark for leadership for me.

Today, my specific role at CalEnergy is no longer relevant; what matters is that experience became an important period of personal growth for me. I feel fortunate to live in Omaha. The business development in this city adheres to core fundamentals, is value-oriented, and has nurtured numerous century-old enterprises across various industries, including insurance, construction, railroads, and manufacturing, with the energy sector soon to join.

After CalEnergy was renamed MidAmerican Energy Holdings and acquired by Berkshire, I met Warren and Charlie. I admire the way they built the business together, integrating their beliefs about business and life into the company's development. These beliefs have shaped Berkshire's culture and values and continue to guide the company's growth, allowing it to navigate market cycles, withstand industry changes, and external shocks. The company's resilience stems from our clear understanding of our positioning and operating model.

Berkshire's unique shareholder group—our business partners—also deeply understands the importance of culture and values to the company's success. Through my interactions with all of you at the annual shareholder meeting, I am well aware that you hope we can move forward together and achieve success in the right way.

Berkshire's culture and values form the operational framework of the company, determining our development strategy and business decisions. As CEO, this framework guides all my daily leadership work The investment vision of shareholders far exceeds the tenure of any CEO. Simple arithmetic can illustrate that I cannot serve as CEO for 60 years like Warren; that goal is rather grand. However, I hope that twenty years from now, when my tenure is only a fraction of Warren's, you or your descendants can take pride in Berkshire becoming even stronger.

Corporate Culture and Core Values

Berkshire's success is inseparable from the efforts of nearly 400,000 employees. They consistently uphold and practice the company's culture and values across all operational businesses—from See's Candies to the Government Employees Insurance Company, and subsidiaries across various industries—this is the core driving force behind the company's development. At the same time, the company's success is also attributed to the leadership of the board of directors, which has always maintained a high degree of alignment with the company's developmental focus.

Last month, I wrote to all employees, emphasizing that Berkshire's culture and values have remained unchanged and will be passed down forever. I believe it is necessary to share the complete statement from the letter with you, along with some personal insights based on my experiences at Berkshire (noted in regular font). Although these values are listed separately, they support and are inseparable from one another.

Berkshire is a uniquely integrated enterprise, established with the intention of achieving rational and efficient allocation of capital. The insurance business is our core, while we hold substantial equity stakes in many other high-quality companies across various industries. Our business philosophy has always centered around the goal of being an excellent steward of shareholder capital, committed to maximizing the long-term growth of Berkshire's intrinsic value per share.

We are dedicated to inheriting and consolidating the great enterprise built by Warren Buffett and his business partner Charlie Munger, pursuing excellence with steadfastness, ensuring that this legacy is passed down through generations.

Corporate Culture

Our corporate culture begins with a sense of partnership. Shareholders are our partners; we have earned their trust and must continue to safeguard that trust through our actions. The interests of shareholders are at the core of all our decisions.

This sense of partnership is reflected not only at the Omaha headquarters but also extends to all operational business segments. All employees uphold a sense of ownership, managing shareholders' assets as if they were their own. We plan our development with a decades-long vision, act with discipline, and uphold all commitments. The concept of fiduciary management is deeply embedded in every aspect of the company's operations, making our culture a system that drives long-term performance growth rather than merely a collection of ideals.

On May 1, 2021, Charlie said, "Greg will safeguard the company's culture." This statement will forever resonate in my heart. It reminds me that corporate culture is our most precious asset; it urges me to uphold the core qualities that define Berkshire; and it motivates me to ensure the continuous transmission of the company culture.

During my tenure at Berkshire Hathaway Energy, Berkshire's culture profoundly influenced the company's operations. When making capital allocations or assessing potential risks, Warren's questions always hit the core. At the same time, we are granted ample operational autonomy, always centered on the customer and adhering to a long-term development perspective. This sense of ownership is a fundamental requirement for all managers at Berkshire

Core Values

The following core values are the behavioral guidelines we adhere to, practiced day in and day out, striving for excellence.

1. Decentralized Management Model

We select the best managers to lead various operational businesses, allowing them to lead excellent teams in their work. The company adopts a decentralized management model, granting managers operational autonomy based on full trust, minimizing bureaucracy, and enabling managers to focus wholeheartedly on business development. In return, we require managers to take responsibility for operational performance and uphold integrity in their duties. This autonomy has attracted many outstanding talents to join Berkshire.

When I transitioned to Vice Chairman of Non-Insurance Operations in 2018, managers from various business segments raised the same question: Would the decentralized management model change their responsibilities? I assured them that I had personally practiced the corporate culture of "combining autonomy with accountability" and witnessed the results of this model. Decisions made by those closest to the business and responsible for operational outcomes lead to more efficient, professional, and resolute decision-making. This will never change. Our CEOs will never have to navigate through layers of bureaucracy, nor will they make decisions that harm long-term value due to short-term profit pressures.

The decentralized management model is our competitive advantage, attracting managers who can create value in self-managed environments and are willing to take responsibility. What Berkshire needs are leaders who align with the company's principles, not those who expect the company's principles to accommodate personal interests.

2. Integrity and Honesty

We always defend Berkshire's reputation for integrity, ensuring that our thoughts, words, and actions are highly consistent. Our decisions adhere to the company culture, communication is characterized by honesty and transparency, and actions fulfill all commitments. This reputation is not self-proclaimed but is built through years of compliant operations and adherence to principles. Every action is aimed at further deepening shareholders' trust in Berkshire.

For over twenty years, at every shareholder meeting, we have played a clip of Warren's remarks during the 1991 congressional hearings at Solomon Brothers: "If it causes a financial loss to the company, I can understand; but if it tarnishes the company's reputation in any way, I will take severe action." Our commitment to integrity remains unwavering and uncompromising. We understand that integrity is not a quality displayed in a showcase for admiration, but an actionable commitment that must be practiced, maintained, and reinforced day after day.

Business operations will always have ups and downs, and when we encounter failures, we will admit them candidly. Sticking to the right path also means being brave enough to correct our own mistakes. In 2025, Burlington Northern Santa Fe Railway Company reached a settlement with the Swinomish Indian Tribal Community regarding a long-standing dispute over crude oil transportation across tribal land, which serves as a prime example. The decision that sparked this dispute was made years ago, but the current management established a partnership with the tribe through communication, understanding, and respect. Burlington Northern Santa Fe Railway Company acknowledged past mistakes and apologized, paving the way for a mutually beneficial agreement that met customer transportation needs while ensuring safe operations on tribal land In all operational activities, we face choices in our business conduct every day. The hundreds of thousands of employees in the company are good people who uphold integrity and adhere to the right path, but in large organizations, a few individuals inevitably violate the company's standards. We will not tolerate such behavior, and once it occurs, we will deal with it decisively and severely.

Protecting the company's integrity and reputation is an endless journey. Rest assured, we will always give our all.

3. Financial Strength

We consistently maintain a rock-solid balance sheet to ensure that Berkshire's foundation for development is never shaken. We use debt prudently and conservatively to maintain financial strength. Ample liquidity allows us to meet all debt obligations even in the most adverse market conditions, while also enabling us to act swiftly when opportunities arise.

We are committed to maintaining excellent financial strength, and the balance sheet is a strategic asset for us to position ourselves at the right time. It allows us to make decisive decisions, invest boldly when others hesitate or panic, and stand firm during financial storms.

By controlling the scale of debt, we maintain Berkshire's financial resilience and operational independence. We will always be a high-quality asset in the U.S. and global financial systems, rather than a risk hazard. Currently, the company holds over $370 billion in cash and U.S. Treasury bonds. Part of these funds supports the operation of our insurance business and hedges against extreme risks, while also serving as our reserve funds.

In the future, we will inevitably find more opportunities to allocate shareholder capital without compromising the company's financial resilience. My responsibility is to ensure that the company's liquidity levels and capital allocation are always planned and targeted. Our goal is always to hold equity in businesses with sustainable profitability, rather than merely holding U.S. Treasury bonds.

4. Capital Discipline

We allocate shareholder capital to investment opportunities that match risk and return. Whether expanding existing businesses, acquiring new operating companies, making equity investments, or repurchasing Berkshire stock, we will evaluate each investment opportunity with the core principle of "achieving permanent growth in the intrinsic value per share of the company."

Berkshire's capital allocation principles and strategies guide us in discovering high-quality opportunities, specifically including:

• Investing in businesses that we deeply understand, possess lasting competitive advantages, and have good long-term economic prospects;
• Collaborating with managers who have high integrity, understand customer needs, and embody an ownership spirit;
• Avoiding businesses that disrupt social order or may harm Berkshire's reputation;
• Acting decisively to concentrate capital in a few highly confident investment targets;
• Adhering to discipline, allowing the effects of compounding to take place naturally.

These standards enable us to efficiently and accurately assess various investment opportunities. Despite the company's large scale, we maintain a flexible corporate culture, and large investment opportunities can be communicated privately with us. We guarantee timely feedback, and if a partnership is reached, we will not impose financing conditions. We will decisively reject opportunities that do not align with the company's principles; for those that do align, we will push forward with full effort — we understand that the opportunities we reject far outnumber those we accept In the development history of Berkshire, many observers believe that the company's large cash holdings mean a lack of investment. This is not the case. We are always evaluating various investment opportunities and will consistently maintain patience and discipline to find the highest quality investment targets for our shareholders.

In 2025, based on this investment philosophy, Berkshire announced the acquisition of two distinctly different companies: OxyChem and Bell Labs.

OxyChem is a well-operated industrial chemical company that we initially learned about through our investment in Occidental Petroleum. Its production of chlorine and caustic soda is widely used in key areas such as construction and core industries, making it a necessity. The company's management focuses more on operational efficiency rather than production capacity, maintaining a good operational state based on an integrated asset base and low-cost raw material supply. For Berkshire, acquiring this company adds quality assets to our operational business segment and brings stable cash flow.

Last year, Warren received a letter from Bell Labs CEO Steve Levy, in which he hoped we would pay attention to this family business managed by the daughters of its founder, Malcolm Stark. This letter revealed the core value of the company: Bell Labs focuses on rodent control, meeting the long-term essential market demand. In Steve's words, this company has "high operating profit margins, an excellent historical growth performance, good future growth potential, a simple and understandable business model with perpetual demand, and an outstanding management team." To summarize in our words: this is a company with a lasting competitive advantage, good long-term economic prospects, and led by exceptional managers. Our only regret is that the company's scale could not be expanded tenfold.

These two investments have strengthened Berkshire's operational business segment. Some of our subsidiaries do not require significant incremental investment and can return excess cash to the parent company; others have highly attractive investment opportunities that can achieve long-term compound growth in value.

Stock buybacks are another important capital allocation method for us. When Berkshire's stock price is below our conservatively estimated intrinsic value, we will conduct stock buybacks to ensure that the buyback enhances the per-share value for continuing shareholders. If the opportunity arises, we will also buy back shares in bulk directly from major shareholders. Stock buybacks allow shareholders to hold more equity in Berkshire without needing to add any capital.

Regarding cash dividends, our principle remains unchanged: as long as every $1 of retained earnings can create more than $1 of market value for shareholders, Berkshire will not pay cash dividends. The board reviews this policy annually.

Whether acquiring entire companies, investing in publicly traded company equity, or repurchasing company stock, our capital allocation actions always adhere to discipline. Regardless of the size of cash and U.S. Treasury holdings the company has, this principle will not change. We will carefully assess value, patiently wait for opportunities, and hold targets for the long term — preferably permanently.

5. Risk Management

We proactively identify risks and are committed to controlling the overall risk level of the company. We adopt a decentralized risk management model, developing appropriate risk management strategies based on the scale and complexity of each operational business. We focus on risks that could damage the company's reputation, weaken financial strength, or impact long-term development opportunities Risk management is the core work of Berkshire, with the CEO also serving as the Chief Risk Officer, which is one of the company's most important responsibilities.

The key to fulfilling this responsibility is to build a top-notch risk management team. In the field of risk management, Ajit has set the industry benchmark. His rigor in insurance risk pricing and management has established industry standards. Any insurance contract may face legal disputes, and new types of insurance carry higher risks. The costs associated with pricing insurance products may only become apparent years later. Therefore, accurately pricing insurance risk is crucial; if the pricing is unreasonable, we will decisively abandon it. This philosophy is at the core of our insurance business, and Ajit's capabilities in this area are unmatched.

As a result, our insurance business has become a global leader, capable of taking on risks that other insurance companies dare not touch, and we will unhesitatingly fulfill our claims obligations. With unparalleled financial strength, we can independently hold underwriting risks and retain all profits for our shareholders, rather than diluting earnings through the purchase of reinsurance.

Of course, risk management is equally critical for non-insurance businesses. Each business segment must comprehensively assess its specific risks and prepare for potential new risks before pursuing new business or incremental investments.

In all our operations, our core responsibility is to understand risk and proactively manage it.

6. Operational Excellence

We are committed to pursuing excellence in operational performance across all operational businesses. All employees consistently strive to exceed customer expectations, enhance competitiveness by improving operational efficiency, and respond to challenges in operational models, while prudently reinvesting funds into business development. We understand that business performance will fluctuate annually; therefore, assessing a company's success is not based on its short-term performance, but rather on its ability to maintain and strengthen its competitive position and improve economic prospects over the long term.

At Berkshire, operational excellence is not a short-term plan, but rather the inevitable result of disciplined decision-making across all business segments. This effort begins with safe production and permeates every day of customer service, product manufacturing, and market competition.

In February 2025, a major fire occurred at the precision casting company's factory in Jamestown, Pennsylvania, and the company's response perfectly exemplified Berkshire's operational philosophy. All employees on site were safely evacuated, and the team worked closely with firefighters, providing factory layout maps and identifying potential hazards. After the fire, the precision casting company supported local volunteer fire departments, assisted municipal efforts, and conducted comprehensive environmental testing to confirm the surrounding area was safe.

This fire also presented significant operational challenges: the factory produced over 700 exclusive components, which were key parts for core aerospace customers. CEO Mark Donegan and his team quickly took action, reallocating production tasks to factories across the U.S. and globally, while strictly adhering to safety, quality, and delivery standards, ultimately ensuring that no customer's production line was halted due to a disruption in component supply. This incident validated the effectiveness of our management model: a decentralized leadership system, clear division of responsibilities, and exceptional execution capabilities under high-pressure conditions The pursuit of operational excellence is an endless journey. By always being customer-centric, enhancing operational efficiency, and adhering to continuous improvement, we can achieve long-term growth in corporate value.

These core values have jointly forged Berkshire and equipped us with the capability for sustained success in the decades to come. Although we have explicitly listed these values for the first time this year, future shareholder letters will publish them as an attachment, with each letter elaborating on our specific practices in implementing these values across the company.

The influence of these values is also vividly reflected in the company's current operating performance.

Berkshire's Operating Performance

In 2025, Berkshire achieved an operating profit of $44.5 billion, down from $47.4 billion in 2024, but above the average annual level of $37.5 billion over the past five years. This performance not only confirms the company's resilience in its operating businesses but also indicates that we still have significant room for improvement.

Before delving into the details of the performance, it is necessary to reiterate a core concept of Berkshire: the net profit calculated according to U.S. Generally Accepted Accounting Principles (GAAP) can experience significant annual fluctuations due to realized and unrealized investment gains and losses, so interpretations of this metric should be approached with caution. In the long run, investment gains and losses are significant, but when assessing the company's annual operating performance, operating profit remains the highest quality indicator.

Equally important is the cash flow generated by the company's operations. In 2025, Berkshire's net cash flow from operating activities was $46 billion, exceeding the average annual level of over $40 billion over the past five years, confirming our ability to identify investment opportunities across various business segments.

Insurance Business

In 2025, Berkshire's insurance business achieved its core goal: disciplined growth in both underwriting profit and float.

We have a number of top-tier insurance subsidiaries that operate with a long-term development perspective. The performance in 2025 reflects both the inherent advantages of each company and the changes in industry trends: after several years of pricing and policy adjustments, the insurance industry saw a trend of slowing down or even reversing adjustments in 2025, especially in the second half of the year. This suggests that for a period of time, our property and casualty insurance business may experience some contraction.

Despite significant claims losses due to major wildfires in Los Angeles at the beginning of 2025, the Atlantic hurricane season was unusually calm. For the first time in a decade, no hurricanes made landfall in the United States — the U.S. is our largest global risk exposure area for primary and reinsurance businesses. This also reminds us that the forces of nature are uncontrollable, neither Warren nor I can influence them.

In 2025, our property and casualty insurance business had a combined ratio of 87.1%, far better than the five-year average of 90.7%, the ten-year average of 93.0%, and the twenty-year average of 92.2%. For an insurance company of our size, this is an outstanding underwriting performance. (The retrospective reinsurance business, which does not charge regular premiums, is not included in the above data statistics.) When it comes to the insurance business, we must once again express our recognition and gratitude to Ajit. For nearly forty years, his judgment and discipline have allowed us to accurately and cautiously take on large, complex risks. The team and organizational structure he has built deeply understand the boundaries and opportunities behind large risks, and his principles continue to guide the team's development. The team's steady performance benefits the entire company.

1. Government Employees Insurance Company

The Government Employees Insurance Company is an important force in driving the group's comprehensive cost ratio down. In recent years, the company has continuously optimized its cost structure, strengthened underwriting discipline, and improved customer segmentation and risk pricing capabilities. The industry-wide rate increase from the end of 2022 to 2024 will continue to positively impact the company's performance in 2025. Although there are differences in the rate adjustment magnitude across different insurance types and regions, the pricing environment remains robust, and the Government Employees Insurance Company continues to benefit from this.

In recent years, the comprehensive rate increase of the Government Employees Insurance Company has restored profitability, but it has also led to a decline in customer retention rates. Competitors' rate reductions may further exacerbate this pressure in 2026. The company team remains focused on precise risk pricing for both new and existing customers, aiming to restore customer retention rates while adhering to underwriting discipline, a process that requires time.

In addition to retaining customers through more refined pricing strategies, the Government Employees Insurance Company is also increasing its technological investments to enhance operational efficiency and service quality, while maintaining its position as a low-cost service provider in the industry.

2. Primary Insurance Business Segment

At the beginning of 2025, the market demand for the company's other property and casualty primary insurance business remains stable, with most commercial insurance segments priced at reasonable levels or continuously improving. However, as the year progresses, a large influx of capital into the insurance market has led to a decline in pricing for several important insurance types or a slowdown in rate increases. We always prioritize underwriting discipline over business scale, so after the attractiveness of pricing declines, premium growth has stagnated. We expect that the primary insurance business segment will continue to face market pressure in 2026 and even further into the future.

3. Reinsurance Business Segment

The reinsurance business segment faces a similar market environment. A large influx of capital from traditional and alternative markets into the reinsurance industry, coupled with a significant reduction in global major regions' reinsurance catastrophe losses in 2025, has led to a substantial decline in property reinsurance pricing. In most accident and health reinsurance segments, the claims inflation rate continues to exceed the rate of pricing increases. As long as this industry cycle persists, our reinsurance premium scale may contract.

With Berkshire's structural advantages, the insurance business team will always remain patient:

First, sufficient capital enables us to take on large, special risks;

Second, granting insurance business managers full operational autonomy, free from quarterly profit targets or business growth requirements, avoids deviations in underwriting judgment;

Third, viewing underwriting discipline as a core element of insurance business success;

Fourth, adhering to a long-term development perspective, avoiding blind adherence to the industry's short-term frenzy and speculation The future market environment will favor insurance companies that focus on sustainable growth in underwriting profits rather than merely pursuing business scale; favor those that value customer trust and loyalty rather than short-term market share spikes; and favor those that adhere to long-term financial resilience rather than chasing short-term speculative opportunities.

By the end of 2025, the company's insurance float—funds we hold to pay future claims, which can also be invested for appreciation by Berkshire—will reach $176 billion, a significant increase from $171 billion at the end of 2024 and $88 billion at the end of 2015.

Due to insurance regulatory restrictions, the amount of ordinary dividends that Berkshire's insurance subsidiaries can distribute to the parent company is capped, with a dividend amount of $31 billion that does not require prior regulatory approval in 2025. Ultimately, the insurance subsidiaries returned $29 billion to the parent company in 2025, fully confirming the continued robustness of their capital base.

Non-Insurance Business

The non-insurance business segment consists of a number of high-quality enterprises, covering railroads, utilities and energy, manufacturing, services, and retail, as well as Pilot Travel Centers and McLane Foodservice Company.

Berkshire's management model for its 51 non-insurance operating companies is distinctly different from that of most conglomerates: there is no multi-layered management structure, and the parent company does not set allocation-based development goals for each enterprise. Each company's CEO is fully responsible for operational performance and must always pursue operational excellence to address performance shortcomings. Capital allocation decisions for each enterprise are ultimately made by me as CEO of Berkshire, based on the development opportunities and potential risks of each enterprise. Most of the companies operate with no debt, and this status will continue.

Each non-insurance enterprise has made progress in driving long-term value growth, while we also clearly recognize the shortcomings in performance improvement. Regardless of the industry, our expectations for all enterprises remain consistent: managers must uphold an ownership mentality, and the execution process must be rigorous and pragmatic—the standard for performance evaluation is actual results, not subjective intentions.

We are very fortunate that Adam Johnson has now become the president of the company's consumer products, services, and retail business. Adam has been deeply involved with Berkshire for nearly 30 years, including 10 years as CEO of NetJets, and now oversees a business segment composed of 32 companies. Adam and his NetJets team have upheld an ownership mentality, earning market recognition over the past decade through outstanding operational performance, transforming NetJets from a struggling business into a high-quality enterprise that creates value for Berkshire shareholders. This "accountability at the core, refusal to be complacent" operational philosophy will also guide him in collaborating with the CEOs of the enterprises under him.

1. Burlington Northern Santa Fe Railway Company

As one of the six major freight railroads in North America, Burlington Northern Santa Fe Railway Company is a core component of the U.S. economic transportation system. In 2010, Berkshire acquired this iconic enterprise for a stock value of $34.5 billion. By 2025, the company achieved a net cash flow from operating activities of $8.1 billion and returned $4.4 billion to Berkshire through dividends, with an average annual dividend of $4.1 billion over the past five years The success of railway companies ultimately depends on safe operations, reliable services, and a competitive cost structure, which are also the core criteria for evaluating management performance. Burlington Northern Santa Fe Railway has consistently focused on improving these three aspects: safety production is the company's top priority, ranking first in the industry for the past decade; by 2025, the idle time of goods at the docks will be significantly reduced, and network transportation efficiency will reach a new high in the company's nearly 100-year history.

These advancements are commendable, but there is still room for improvement: we need to translate operational improvements into stronger financial performance. We use operating profit margin (the inverse indicator of industry operating expense ratio) as the core metric for performance evaluation. By 2025, the company's operating profit margin will increase from 32.0% in 2024 to 34.5%, but only slightly above the five-year average level.

The gap with leading companies in the industry remains significant, and closing this gap requires continuous improvement in operational efficiency and service quality. For every 1 percentage point increase in operating profit margin, approximately $230 million in incremental operating cash flow can be generated for shareholders. The company team is well aware of the importance of this opportunity, and we will be deeply disappointed if significant performance improvements cannot be achieved in the coming years.

In addition to its own performance improvements, the railway industry also presents potential consolidation opportunities — a merger plan between Union Pacific Railroad and Norfolk Southern Railway has been proposed. Berkshire has made it clear that it has no intention of acquiring other Class I railroads, as the current economic environment does not create value for shareholders. Regarding this merger, Burlington Northern Santa Fe Railway's core focus is to ensure that it can continue to provide highly attractive services to customers, including comprehensive and competitive access to the Eastern U.S. railway market.

2. Berkshire Hathaway Energy

Berkshire Hathaway Energy has a clear goal: to provide customers with reasonably priced and stable energy services. With the surge in electricity demand driven by artificial intelligence computing and the ongoing rise in wildfire risks in the western United States, the energy industry is entering a significant investment cycle, and the company's responsibilities are becoming increasingly important. We welcome industry growth, but growth should not come at the expense of energy affordability and supply stability for households, small businesses, and industrial users.

Berkshire Hathaway Energy takes pride in consistently creating substantial value for customers in the markets it serves: average retail electricity prices are 24% lower than the national level, and electricity prices in all service markets are in double digits lower than the national benchmark. The infrastructure built for ultra-large data centers and cloud computing companies should be borne by the relevant customers and fully reflect the risks of significant fluctuations in long-term demand. The company will only pursue such incremental investments and allocate shareholder capital when the risks and rewards are balanced.

In terms of wildfire risk management, Berkshire Hathaway Energy plays a leading role in the industry, maintaining close cooperation with regulators, government officials, and service communities, and implementing one of the most comprehensive mitigation plans in the industry. When its utility companies are responsible for wildfire incidents, they proactively take responsibility, including a series of settlement agreements reached by Pacific Gas and Electric Company regarding the Labor Day wildfires in 2020. At the same time, Pacific Gas and Electric Company is not the final risk bearer and should not be viewed as an "ATM." Without assuming responsibility, the company will protect its rights and interests through legal means. Combining the fulfillment of responsibilities with a resolute opposition to unreasonable compensation demands is the core of maintaining the regulatory contract in the utility industry.

Berkshire Hathaway Energy is undergoing strategic adjustments to prepare for future development. In 2025, despite facing numerous challenges, the company achieved a net cash flow from operating activities of $8.4 billion, in line with the five-year average. Our investment willingness depends on the continued effectiveness of the regulatory contract in the utility industry — that is, the ability of enterprises to obtain reasonable returns on invested capital. The company has a large number of high-quality investment opportunities in the short term and will proceed selectively.

3. Manufacturing - Industrial Products Sector

In 2025, the industrial products sector faced a severe macro market environment, but companies still achieved robust profits, confirming their risk resistance capabilities. The overall operational performance of the sector was excellent, especially for Precision Castparts, Marmon Group, International Metalworking Companies, and Lubrizol, which laid a solid foundation for companies to explore incremental investment opportunities.

Lubrizol's CEO Rebecca Liebert and her team played a key role in the acquisition and subsequent integration of OxyChem — OxyChem will be incorporated into the Berkshire system as an independently operated company. While continuing to serve as CEO of Lubrizol, Rebecca took over the management of OxyChem, working closely with OxyChem's CEO Wade Allemann and his leadership team.

Precision Castparts is our largest industrial manufacturing enterprise, which has experienced a difficult period in the aerospace industry over the past decade: a significant decline in aircraft production, shrinking market demand, and a series of external shocks — especially during the pandemic when air travel came to a complete halt, putting continuous pressure on the company's profits.

Now, the team at Precision Castparts has passed the most challenging phase: the air travel market has fully recovered, aircraft orders are continuously increasing, and the market demand for the company's components has returned to normal and is steadily growing. Throughout this process, the company has adhered to operational discipline, with management focused on converting the benefits of industry recovery into profit levels that match long-term development potential. In 2025, the company achieved a net cash flow from operating activities of $2.4 billion, far exceeding the annual average of $900 million in 2021-2022 and $1.7 billion in 2015 (the complete fiscal year before being acquired by Berkshire).

4. Manufacturing - Building Products Sector

The building products sector covers the entire industry chain of the U.S. residential and commercial construction market, from residential construction by Clayton Homes to the supply of building materials and finishes by other subsidiaries. Like all markets, end consumer preferences are constantly changing, and the companies under its umbrella must proactively adapt to meet the dynamic demands of the market.

Shaw Floors has gone through a difficult development period: consumer demand for soft flooring materials (carpets) has continued to decline, while the company's own operational decisions have also encountered missteps — during the expansion of hard flooring material capacity, operational execution deviated, affecting product quality and customer service. Currently, Shaw Floors is rebuilding its manufacturing system and restoring operational discipline to regain customer trust Clayton Homes is the leading company in the sector, with a business model centered on efficient manufacturing and construction, complemented by integrated financing services, demonstrating strong risk resistance amid short-term fluctuations in the residential market. This model allows the company to continuously meet the market demand for quality, affordable housing across the United States.

Despite annual fluctuations in operating activities within the building products sector due to overall trends in the construction industry, the long-term market demand for residential and commercial buildings remains robust, laying a solid foundation for sector development. In addition to Clayton Homes and Shaw Industries, the sector also includes Johns Manville and Mitk, all of which have disciplined and experienced management teams that are always customer-centric and possess mature operating models.

5. Manufacturing - Consumer Products Sector; Services and Retail Sector

As mentioned earlier, Adam serves as the President of Berkshire's Consumer Products, Services, and Retail businesses. In 2025, despite some consumer groups facing a challenging market environment, the overall performance of the sector remains strong.

NetJets is the leading company in the services sector, consistently prioritizing safety and excellent service, solidifying its market position in high-end services. This core advantage has attracted a large number of quality clients, currently operating nearly 1,100 aircraft in over 150 countries worldwide, making it a premium asset in the highly competitive aviation services industry.

Pilot Travel Centers continues to optimize its operational performance. As North America's largest travel center operator, the company competes in the market based on location, service quality, and supply stability. Management focuses on operational execution at the store level: enhancing the consumer experience for professional drivers and regular travelers, increasing investments in store upgrades, food supply, and customer loyalty programs. Since 2023, the company has consistently increased capital expenditures to advance facility modernization and expand the electric vehicle charging network. These efforts are also reflected in third-party research data: the preference rate for Pilot Travel Centers among professional drivers increased from 27% in 2022 to 35% in 2025, ranking second in the industry. However, our goal is to be number one in the industry; we will not be satisfied until we achieve this target. Berkshire first invested in Pilot Travel Centers in 2017, but due to contractual restrictions, it did not gain operational management rights until 2023; this oversight will not happen again.

The quality of the company's operations is directly reflected in its cash flow generation capability. In 2025, Pilot Travel Centers achieved a net cash flow from operating activities of $1.7 billion, an increase from 2024. As operational performance continues to optimize and capital needs return to normal, the company will return more cash to Berkshire.

Equity Investments

Berkshire's management of its equity investment portfolio, like its management of operating businesses, always adheres to capital discipline. The core part of the portfolio is highly concentrated in a few high-quality American companies, including Apple, American Express, Coca-Cola, and Moody's. We have a deep understanding of these companies, highly respect their management teams, and firmly believe that these companies can achieve decades of value compounding growth. We will continue to adhere to this concentrated investment strategy, and adjustments to core holdings will be made with restraint, only when there is a fundamental change in the long-term economic outlook of the companies Berkshire's Core U.S. Stock Holdings (Unit: Million USD)

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Our investments in Japanese companies adhere to the same stock selection criteria. In our view, the importance and long-term value creation potential of this portion of investments are comparable to our core holdings in the U.S.

Berkshire's Japanese Company Holdings (Unit: Million USD)

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Berkshire has financed its investments in Japan in yen, with the financing amount roughly equivalent to the cost price of the yen investments, an average financing cost of 1.2%, and a weighted average term of about 5.75 years.

As of the end of 2025, the total market value of the aforementioned U.S. and Japanese company holdings is $194 billion, accounting for nearly two-thirds of the company's $297.8 billion equity investment portfolio; the total dividends generated in 2025 amount to $2.5 billion, resulting in a dividend yield of 10% based on an original cost price of $24.5 billion.

In addition, we also hold a small amount of large equity stakes in other companies, and the allocation of these investments will be more flexible as relative value and market opportunities change. In certain cases, if the fundamentals of these companies meet the requirements, these investments may be included in the core holdings in the future.

We also hold equity method investments, primarily including Kraft Heinz Company and Occidental Petroleum Corporation. Among them, the investment in Kraft Heinz has not performed as expected; even when accounting for the preferred stock portion of the initial investment in Heinz, the overall investment return is still far from a reasonable level Equity investment is the core business of Berkshire's capital allocation, ultimately overseen by me as CEO. Ted Weschler manages about 6% of the portfolio, including some holdings previously managed by Todd Combs. Ted's contributions go far beyond investment management; he is deeply involved in evaluating significant investment opportunities, providing valuable advice across various business segments, and supporting Berkshire in multiple ways.

Berkshire has an unparalleled foundation for development: an excellent operational framework that shapes strategy and guides management (i.e., the company's culture and values), along with a group of outstanding shareholders.

The insurance business will always be our core. Although its performance may fluctuate with changes in the industry capital environment, even significantly, this core business will continue to grow and thrive due to its structural advantages.

The non-insurance business segment generates substantial operating profits and stable recurring cash flows. The ongoing pursuit of operational excellence will further enhance the strength of this segment, creating greater long-term value for shareholders.

As market opportunities arise, our equity investment portfolio will continue to optimize and grow, serving as an important extension of the insurance business and the company's capital base. When the value of stock buybacks becomes apparent, we will efficiently return capital to shareholders through this method.

Due to the company's scale, the realization of compounding effects faces certain challenges — a fact we have long been aware of and are willing to face candidly. Our growth opportunity lies in achieving long-term growth in per-share value, even if the growth rate is limited; at the same time, we always prioritize managing shareholders' downside risks as a core objective.

The value created by Berkshire stems from the precise judgment and outstanding leadership of the managers of each operational business segment, day in and day out. As shareholders, we are fortunate to have a board of directors that deeply understands and supports Berkshire. The board members recognize the company's culture and values, and their diverse expertise, rich industry experience, and comprehensive perspectives enhance the strength of the company's fiduciary management. Warren and Charlie have laid the foundation for the collaborative development of the board and the company, and Warren, as chairman, continues to provide us with guidance through his exceptional judgment.

In December 2025, we announced that Chief Financial Officer Mark Hamburg will retire from Berkshire on June 1, 2027, and will transition the CFO responsibilities a year early on June 1, 2026. Chuck Zhang will succeed him in this role, facing significant challenges. Mark will assist Chuck in quickly adapting to his new role before embarking on a well-deserved retirement. Mark is a valuable partner to me, and as Warren said, "Mark is indispensable to Berkshire and me; his integrity and judgment are invaluable, and his contributions to the company far exceed what many shareholders can imagine." I fully agree with Warren's assessment.

To further strengthen the management capabilities of the company headquarters, we recently appointed Mike O'Sullivan as Berkshire's first General Counsel. He will provide comprehensive legal support to the company while maintaining the company's culture.

The core of maintaining a partnership with shareholders is continuous, clear, and honest communication with all of you. Berkshire will always release information to all shareholders through unified channels, ensuring that every shareholder has access to all the information needed to assess the company's performance We focus on the quality of communication rather than its frequency. If significant matters arise, I will communicate with everyone in a timely manner, but I will not issue quarterly comments, as we always adhere to a long-term development perspective.

The next shareholder meeting will be held on May 2, 2026, at the annual shareholders' meeting in Omaha (this is a day for shareholders, which other companies may refer to as "Investor Day"). The meeting will continue in the familiar format, centered on open communication and direct interaction. Under the moderation of Becky Quick, we will answer your questions in an unscripted manner. We also look forward to shareholders gradually getting to know more members of the Berkshire team.

The agenda for this shareholders' meeting includes: an update from the CEO on Berkshire's operational status; two Q&A sessions, the first of which will be answered jointly by Ajit and me, and the second by Katie Farmer (Burlington Northern Santa Fe Railway Company), Adam Johnson (President of NetJets and Consumer Products, Services, and Retail), and me. Katie and Adam will share the challenges and opportunities faced by their respective business segments. Through these two Q&A sessions, we will provide a comprehensive overview of the company's insurance and non-insurance businesses. Although each Q&A session has core speakers, shareholders can ask me any questions at any time. For more meeting details, please refer to this annual report.

The Berkshire Board of Directors, the CEOs and management of various businesses, and I personally look forward to your presence in Omaha and to continuing to work together with you. The core of Berkshire's extraordinary success is the close relationship we have with our shareholders. I am honored to take on the responsibility of continuing to build the company and deepen shareholder partnerships, and I will lead the company into the future with determination and clear objectives.

Gregory E. Abel

Chief Executive Officer

February 28, 2026

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